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New District measure requires six-month mediation before foreclosure

During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and government officials have taken action after discovering that many mortgage documents were mishandled.

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Friday, November 12, 2010; 9:38 PM

This week the District Council approved a measure requiring lenders to go through six months of mediation with a homeowner before proceeding with a foreclosure.

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Mediation allows the borrower and the lender's representative to negotiate, with the guidance of an impartial go-between, over possible alternatives to a foreclosure, such as a loan modification. But neither side can be compelled to agree to a mediated solution.

Peter Tatian, research associate with the Urban Institute, a social policy think tank, said mediation can be useful in a place like the District, which does not require courts to review foreclosure cases.

"Having a mediator that can be that extra set of eyes and ears helps bridge the gap between the homeowner and lender and, I think, can be very beneficial."

There are more than 3,000 homes (including condos) in the foreclosure process now in the District. "We seem to be stuck there for the moment," he said.

Maryland implemented a new foreclosure mediation law July 1, which requires that a lender send the homeowner a "Request for Mediation" form when it starts foreclosure proceedings in a Maryland court. Homeowners have 15 days in which to file the request with the Circuit Court and must pay a non-refundable fee of $50.

The new D.C. program was proposed by Ward 4 Council Member Muriel Bowser and will be managed by the District's Department of Insurance, Securities and Banking. The Department offers a printed "Foreclosure Mitigation Kit," which can be downloaded from disb.dc.gov. The department can be reached at 202-727-8000.

In Maryland, information on foreclosure mediation is available at mdhope.org or 1-877-462-7555.

-Elizabeth Razzi

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